FRC highlights the audit risks of housing associations

The Financial Reporting Council (FRC) has today (25 July 2013) issued a proposed revised version of its practice note on ‘The Audit of Housing Associations in the United Kingdom’.

The proposed practice note reflects:

Changes to the environment in which Housing Associations operate:

Pressures on public expenditure which have led to welfare reforms and lower grant funding and revenue support for Associations;

Changes in the pattern of financing which have resulted in a migration away from bank debt to the bond market; and

Various pressures on Housing Associations to diversify from not for profit to commercial operations and into more complex corporate structures.

Regulatory developments, including where regulators assess Associations’ financial viability, which are likely to be a useful source of audit evidence.

Nick Land, FRC Board member and Chairman of its Audit and Assurance Council said,

“UK Housing Associations provide some 3 million homes and have attracted in excess of £50 billion in bank and capital finance. This economically important sector of the UK economy has its own particular business and audit risks which auditors need to be aware of and respond to, when undertaking engagements in the sector.”

Responses to the consultation paper should be sent to s.leonard@frc.org.uk on or before Friday 25 October 2013.

Notes to editors:

The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.